The Rudd government has promised funding to enable elderly patients to be moved out of high-care hospital wards.
The money, $158 million, which will be available from July, will help provide transitional beds for elderly patients and new beds for patients undergoing rehabilitation.
The facilities will ultimately cost taxpayers 10 times less to operate than acute-care beds in conventional hospital wards.
The Health Minister Nicola Roxon says this is all part of the plan revealed during the election to ease the bed crisis in public hospitals.
The Health Minister says while there are still some negotiations needed with the states and territories about where and how this will happen, the government is committed to starting the roll-out from the 1st of July.
Labor policy documents state that each night 2,300 beds in public hospitals are occupied by elderly people awaiting placement in one of the nation's 2,870 nursing homes.
The plan aims to clear 2,000 valuable beds, allowing them to be used by people requiring surgery or treatment for severe medical problems.
Labor says last year the average cost of running an acute-care bed in a hospital was $967 a day, while the average cost to the Commonwealth of an aged-care bed was only $100 a day.
Ms Roxon says a combination of different strategies are being employed and more money will be invested into nursing homes, because there are shortages and into transition care.
Roxon says transition care provides an interim step where the high-level support of a hospital or a nursing home is not needed, but some care is necessary while patients are rehabilitated.
Ms Roxon says where such facilities exist they have been successful but there are not enough of them.